In the United States, the national savings rate is a dismal 5.6 percent. It’s very low, compared to the mid-1970s when it was inching towards 20 percent. The personal savings rate has remained in single digits since the 1990s, though there was a one-year period in 2010 when it jumped to 10 percent.
Although any savings is a good thing, CNN Money is vilifying these savers by blaming them for the lack of economic growth. Even though Americans are only putting away about five percent of their income, the website is claiming that that the economy won’t grow unless consumers shop, shop, shop.
Here are a couple of excerpts from the article:
“People in the U.S. spent less in April than they did in March, according to the latest data from the Commerce Department. It’s hardly a new trend. Americans have been hesitant to buy much at the store or elsewhere for months. Instead, they have been increasing their savings.”
“That’s important because American spenders make up the majority — about 70% — of economic activity in the country. If people don’t spend, the economy doesn’t grow.”
Yes, between two-thirds and three-quarters of the U.S. economy is consumer spending. But that’s not a good thing. We have to remember that an economy grows through savings and investments. When money is placed into a savings account, the bank pays you interest, despite its all-time lows thanks to the Federal Reserve. This deposited money is then loaned out to entrepreneurs that want to establish a business or businesses that want to expand their ventures.
These behaviors are what grow the economy, not buying a $12 t-shirt and $10 latte bought with a credit card that will soon cost the customer 20 percent extra in interest.
It’s not a bad thing to consume. But when the average consumer is in the red by tens of thousands of dollars and is on the brink of financial collapse if they miss one paycheck, consumption is the last thing on their mind (SEE: Personal Financial Collapse Continues: Millions have zero cash savings). Let’s not forget about steadily rising price inflation. Consumption is great when the goods and/or services are bought with saved money.
We should be encouraging savings and investments and discouraging consumption with credit and small bank account balances. At the same time, we should be demanding market interest rates to give us higher monthly returns.
free trade that,s why we don,t grow to much global we don,t keep are money in the US .US jobs that,s the economic life blood of the cournty the rich think that thy can make money with out giving us job,s that,s who to blame and the gov,and you can blame the pore too, but that,s becouse of no work and who don,t blame some one for getting free money the rich get it and the gov, give it like candy